Increasing competitiveness in the personal computer industry makes it essential that personal computers have a reasonable total cost of ownership. Presently, software distribution and software updates account for a large part of total cost of personal computer ownership. This is in part due to the complexity of software distribution, where there are many levels in the software delivery chain, e.g. independent software vendors (ISVs), personal computer manufacturers, various levels of resellers, and finally management information systems (MIS) departments. Each level of software distribution uses different schemes for software loading and updating, thus adding unnecessary confusion and complexity in the delivery chain. This leads to convoluted license agreements and contradictory objectives at all levels in the software distribution supply chain.
For example:                ISVs need efficient channels for their products, but must make sure that their intellectual property rights are not abused.        Personal computer manufacturers need extremely efficient software loading processes to maintain profitability, but must accommodate tailor made software pre-loads.        Resellers must aggressively extend their offerings upstream and downstream to keep their added value and compete with direct model players, but must not lose their relationships with original equipment manufacturer (OEM) vendors.        MIS departments need strong total cost of ownership (TCO) control, but must offer flexible solutions for their end users.        Finally, corporate users need a flexible choice of productivity tools, but must comply with end user licensing agreements (EULAs) and corporate rules.        
It is not unusual for 70 percent of the software pre-loaded by a computer vendor to be replaced by customer images, either from the computer vendor's pre-loaded software or from a custom made integration of software components. This leads to a waste of time and money in the manufacturing process for a large proportion of systems sold.
At the same time, alternative indirect distribution models (such as Internet-based and shareware models) have emerged, co-existing with both corporate software supply chain models and retail models. All models involve similar steps (e.g. copy, install, evaluate, pay, and use), even if these steps are not taken in the same order and by the same people. Such alternative distribution models are gaining acceptance at a fast pace because of the increased availability of Internet connections in corporations, and because of the general trend to move towards an information-centric computing environment.
The foregoing is a compelling reason for network based distribution of software to become the preferred software supply mechanism. For example, such distribution bears the flexibility and time effectiveness of on-demand supply, while keeping records of granted licenses. This is what the Microsoft Corporation of Redmond, Wash. has attempted to realize with the Active Directory features provided in the Windows NT5 product, which provides basic software distribution mechanisms as an integral part of the core functions of the future corporate operating system.
However, the NT5 model is limited by at least the following two factors:
First, corporations must re-think their information technology (IT) infrastructure to take full advantage of NT5 Active Directory model, thus requiring significant effort in deployment, which is in contradiction with the primary objective of the MIS department, i.e. to offer stability to the corporate IT environment. As an example, a large proportion of corporate customers (in some cases, 40 percent) still choose to use the Windows for Workgroups operating system, primarily because a large number of custom made applications have been developed for this operating system.
Second, if the NT5 model were to be extended from an intranet environment to an Internet online distribution model, it would require the use of strong security mechanisms to protect the intellectual property of the content owner, as well as the credit/debit information of the content user. Even though NT5 includes much stronger security features than previous operating systems (e.g. by using a Kerberos scheme for access rights management and encryption, as limited by current U.S. export control laws), it still lacks sufficiently strong encryption mechanisms to ensure the complete confidentiality of long lasting information, such as software components and customer credit information. Moreover, it does not provide sufficiently trustworthy mechanisms to protect the content provider from software piracy outside a well protected corporate environment, i.e. in the real world.
Another difficulty with software distribution stems from the fact that the software licensing mechanism is not separated from the software supply process. For example, the party who has a legal agreement with the ISV to distribute the software is not necessarily the most appropriate or economically effective party to supply the software components. This gives rise to at least the following anomalies: Corporate customers may ask their IT suppliers to duplicate their software image even though corporate resellers do not have the right to load full operating systems; the corporate end-user may download software via the Internet from the World Wide Web, sometimes infringing corporate IT rules; and OEMs are asked to load full suites of applications, but do not necessarily have agreements in place with ISVs to do so. This leads to many gray area practices and results in either inefficient processes or software licensing problems.
The IT industry is evolving from a computer-centric model to an information-centric model. In the near future, protecting information assets will be even more crucial to corporate software and systems customers. This requires the use of encryption. While various schemes are known for remotely unlocking software, none of the known schemes are well suited for a software distribution model that encompasses an entire software distribution chain. Rather, such systems are typically confined to a simple client/server model.
It would be advantageous to reduce software pre-load costs and thereby save some of the cost of software pre-load licenses. It would also be advantageous to offer new manufacturing flexibility and to adapt to networked software distribution opportunities, while enhancing the existing software distribution chain.